It takes two to tango

In outsourcing it takes two to tango - customer and supplier. Both share in success, and in failure.

Thus questions are now being asked about the role of Government in the massive failure of Carillion: in allowing the company to bid so low that its margins were unsustainable, and in continuing to award contracts last year long after it was clear that the company was in deep trouble and might fold.

As the FT argues today, outsourcing in such circumstances risks becoming a Ponzi scheme, where contracts are inherently worth little, but a steady stream of new contracts is needed to maintain the illusion. 

To be sure, incompetence was another factor, with cast cost overruns on major projects driving up debt.

All of this a very far cry from the Left orthodoxy that private companies are coining vast profits from outsourcing. That was so sometimes so in the 2000s, but certainly not today. Indeed, the impact of austerity on the private sector outsourcers needs to be better understood. By both parties.